QDROphile

A stock dividend cuts the same pie into more pieces; there is no economic substance. The stock dividends on suspense account shares stay in the suspense account and are allocated along with the shares that were there before the dividend, otherwise you would be diluting the ultimate allocation. If you had a real and competent pledge and security agreement, the agreement would provide for the lien to cover shares received from stock splits and dividends.

How about hardships distributions are available only if you have no other assets that can cover the need? The real estate baroness seems to have other assets.

A plan does not have to allow alternate payees to designate beneficiaries. Many defined contribution plans allow it. Although there are arguments to the contrary, allowing a designation of a beneficiary by an alternate payee in most cases under a defined contribution plan should not be an impermissible assignment of a benefit. Certain payment restrictions may apply. Most defined benefit plans (except for cash balance plans) do not allow an alternate payee to designate a beneficiary because they either do not provide for payments to anyone but a participant or spouse or they are correctly concerned with issues under section 401(a) (9) of the Internal Revenue Code. However, it is possible to allow an alternate payee to choose a form of benefit distribution that provides for payments after the alternate payee's death as long as the form is permissible under 401(a)(9), such as a five year certain annuity. One may argue to the contrary. The terms of the plan control, as implemented through the written QDRO procedures.

"Of Counsel" has no estabished meaning. You have to learn more about the particular relationship

Now that pax has explained what "nunc pro tunc" means, I had to go back and edit my message to make the statement negative! Actually, I slipped and omitted the "not" in the post. In short, an order that is issued "nunc pro tunc" has a retroactive effective date. What I was getting at was that I think it would be improper to go back to court to have the original order modified to stop annuity payments on the theory that the modification was not a new (and not qualified) order, but a negation (nunc pro tunc) of the old qualified order, with the same impermissible effect as a new order, but rationalized through legal mumbo jumbo. Hmmm, I wonder what Google would tell us about mumbo jumbo. Sorry about that long sentence and all the commas.

As long as the plan administrator does not suspect fraud, I agree that the plan administrator does not have to take action and the inidviduals need to arrange for the changes they want via an amendment to the QDRO. But even if the parties go back to court and amend the order, I would be reluctant to modify an annuity distribution that had started properly under a legitimate QDRO. A subsequent order cannot change the distribution because an order is not a QDRO if it provides for a type or form of benefit or any option not otherwise available under the plan. I have not seen any plans that allow modification of an annuity once the payments have begun, except suspension upon rehire. A new or amended order could not modify the annuity payments because the modification would not otherwise be available under the plan. And I would not give any credence to "nunc pro tunc." I don't think the plan administrator should choose to qualify the order to modify the annuity. Once the plan allows modification, trouble lies ahead in other circumstances. Also, it may be that permissive modification would cause the plan to be operated contrary to its terms.

It might be helpful to know more abbut the plan's distribution provisions and the QDRO's distribution provisions. Was a lump sum a possible choice, but the AP elected installments? Or did annuity payments start under the QDRO? What would happen to a participant that started benefits but was rehired? None of these questions will lead to a definitive answer, but they might help with interpretations and the choices. One thought: If annuity payments started under the QDRO, I would be very reluctant to stop them. Subsequent events almost never justify modification of an annuity benefit.

If you are worried about a regular monthly 5 day suspension of your trading, you should look for education or advice about investing for retirement.

Why would you want to leave yourself open for dispute at a later date about when you learned or should have learned that you had another defect, regardless of a literal reading of the rules? Hiding the ball is unbecoming. Even if you are square on the rules, you may be put in a bad light that could hurt for other reasons.

When a named fiduciary is the corporate sponsor, there is a very high probability that the directors and executive officers of the company will be identified as fiduciaries. It is always a bad idea to name the company as a fiduciary. In most cases, the "plan administrator" is a fiduciary. Kirk Maldonado makes a decent argument that the plan adminstrator need not be a fiduciary if the duties are carefully limited to only those duties specified for plan administrators under ERISA rules. But plan documents almost never have such limitations.

The purpose is to allow automation. Unless that is compelling, don't use the safe harbor. Life is not so dangerous outside of it. You will need proper plan and adminstration documentation and at least one brain for administration. Bye-bye prototype.

Look at Treas. Reg. section 1.401(k)-1(g)(11).

The plan may be disqualified because of terms that say that loans will not exceed the section 72(p) limits. Failure to follow plan terms will disqualifiy.

Return of premiums is very risky. Once premiums are paid, any assets are plan assets and generally, plan assets are to be used to provide benefits under the plan. Generally, benefits under the plan do not include cash payments to participants. Cash payments under a reimbursement plan simply cover the benefit that the plan provides, e.g. medical services; they do not provide "windfall" cash. Plan assets can be used to give a premium holiday, but I have doubts about whether you can give a premium holiday only to the person who paid the premiums. Depending on the the scope of the "plan," the assets might be used to provide benefits other than what was covered by the original policy. The Department of Labor has been surprisingly flexible with use of demutualization proceeds, but I am wary about treating that as a guide. If you client wants to do this, competent legal advice is needed.

What is the plan going to do with the premium refund? Who is effectively paying the premiums?

Make sure that your plan terms specify that for the first year of the CODA the special definition of compensation applies for purposes of the 3% contribution. If you don't, you could end up with a plan that says the participants get 3% based on the entire year if the definition of compensation already in the plan for purposes of contributions refers to the entire year. You may also may have compensation defined for puposes of contributions to be limited to the portion of the year after the participant becomes eligible for the contribution, such as at mid year entry dates. The plan terms will control and may be more generous than the minimum required by the law.

Possibly a claim that the claims procedure is defective or was not properly followed, with a shortcut to court and no deference to the findings and conclusions of the administrator. I think such a claim would fail and there are other reasons to lose the deference advantage. Mostly I just like to observe bad drafting in the regulations.

mbozek I completely agree with your conclusion. The top hat plan needs claims procedures and can disclose them as needed. But if you try to trace through the terms of the regulations, you run into contradictions. The SPD regulations and the new claims procedure regulations, taken together, don't fit with top hat plans. I was merely pointing out that curiosity, and that curiosity may create some doubt about timing and form of disclosure of claims procedures.

Look at ERISA Reg section 2560.503-1(B)(2). A description must be included in the SPD. Is this similar to dividing by zero?

This discussion is not distracting enough, so here's another distraction. Top-hat plans have to comply with ERISA claims procedures. The claims procedures regulation has disclosure requirements that refer to a summary plan description. The SPD regulations allow top hat plans to avoid SPD distrribution. Hmmm.

Don't forget to check what the plan says and to determine if the child coverage was added involuntarily under the order or if the employee actually made the election. Often employees will make the election when there is an order to the same effect.

RBeck: You and the participant can continue to waste time and emotional energy on feeling wronged, but I think you should catch on to the pretty clear and unifiorm message you are getting here. Unless there are some startling facts that you have not revealed, get on with requesting a distribution and put the money where the participant wants it now.

You could have a plan limit for HCEs that is lower than the 402(g) limit, so the catch up would start at less than the 402(g) limit.

Don't forget that the regulation requires that the determination must be made with respect to "objective standards set forth in the plan." The IRS audit guidelines at one time stated that a "catch-all" provision for determining hardships is not an objective standard. I have not checked the guidelines recently. But that may suggest that plan terms that merely recite "immediate and heavy financial need" are not specific or "objective" enough to pass muster. Even though I do not favor using the safe harbor for "necessary to satisfy," I favor sticking with the list in Treas Reg section 1.401(k)-1(d)(2)(iv) or some other specific list because of the uncertainty over what constitutes "objective standards." If "immediate and heavy need" is not a "catch-all," what is? I also do not believe that the audit guidelines are gospel. Make of them what you will. Another good reason for a specific list is to take the heat off the adminstrator to answer this question each time someone comes up with a new situation.

We have seen quite a bit of confusion and variability among reviewers. The IRS never had a uniform articulated or enforced policy in the first place and everything got out of control. The IRS has this funny antipathy toward ESOPs combined with letting all sorts of improprer practices and lore build up, sometimes with its own misguided help. You have to have some sympathy. ESOPs are a misbegotten square policy peg in the more or less round ERISA/ qualifed plan hole. The professionals shouldn't complain, though. They get fat at this trough.